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The long-term viability of the BMW Group is our top priority. We are
now entering the next phase in the implementation of our Strategy
NUMBER ONE > NEXT: This year marks the launch of the largest
product offensive in our company’s history, including many new
electrified models. The BMW Group is clearly focusing on the future.

But, first, let’s take a look at the latest financial figures.

After a good start to the year, the BMW Group demonstrated its
financial strength once again in the second quarter of 2017. The EBIT
margin of 9.7% for our automotive business was higher than the same
quarter last year. Based on the strong performance in the first half
of the year, we are able to confirm our guidance for 2017.

We will continue to systematically strengthen our performance side
and to leverage efficiencies across all areas of the company. This
enables us to finance from our operating business the substantial
investments needed for electrification and autonomous driving. This
remains our goal, even in the face of increasing global economic volatility.

In the second quarter, Group revenues rose by 3.1% to 25.80 billion
euros. Revenues for the first six months climbed to 49.25 billion
euros. Group earnings before tax for the second quarter totalled 3.06
billion euros and were therefore 9.2% higher than the previous year.
Pre-tax earnings for the first six months reached 6.06 billion euros –
partly due to one-time effects in the financial result. This tailwind
mainly resulted from new investors acquiring a stake in the mapping
service HERE in the first quarter, valuation effects in the other
financial result and a healthy earnings contribution from our Chinese
joint Venture BBA. The EBT margin for the second quarter was 11.8%.

In the first six months of 2017, we continued to invest in expanding
our production network. Our focus is currently on the expansion of our
Spartanburg plant and construction of the new plant in San Luis
Potosí. Investment in equipment and products totalled
1.46 billion euros in the first half of the year. Following the launch
of the new 5 Series Sedan, the popular long-wheelbase version for
China was released in June. The new 5 Series Touring is now also
available. The capex ratio remains relatively low, at 3.0%. This is
typical for the first half-year, in line with seasonal factors.
However, it is distinctly higher than last year. For the full year, we
expect the ratio to be above last year’s figure, but still below our
target of 5%.

Research and development expenditure for the first
half-year rose to 2.65 billion euros. This already reflects spending
for the model offensive over the next two years. We are also
continuing to work on electrification of vehicle architectures and
investing in technologies for autonomous driving. The R&D ratio
for the first six months therefore increased to 5.4%. As previously
announced, we expect the R&D ratio for 2017 and the next two years
to be slightly above our target range of 5 to 5.5%.

I would now like to take a look at performance in the individual segments.

Deliveries in the Automotive Segment climbed 4.6% to
around 634,000 vehicles in the second quarter. In the first six
months, a total of 1.22 million BMW Group vehicles were delivered to
customers – an increase of 5.0% over the previous year. Segment
revenues for the first six months rose by 4.8% to 43.67 billion euros.
Revenues for the quarter totalled 22.98 billion euros. Segment EBIT
for the second quarter was 2.8% higher, at 2.24 billion euros. The
EBIT margin for the same period was 9.7%. Pricing remains challenging.
In highly-competitive markets, profitable growth is our clear
priority. Efficiency improvements were largely able to offset high
R&D costs and the corresponding rising upfront investments for
personnel development. The financial result for the second quarter
climbed to 147 million euros. The BBA joint venture contributed 154
million euros to the at-equity-result – an increase of 10.0% over the
previous year.

A few words about the segment’s financial position: In terms of free
cash flow we are on course to achieve our target of 3 billion euros
for the full year. Free cash flow for the first half-year totalled
2.04 billion euros – partly due to the impact of the major investments
I just referred to.

Let’s continue with the Financial Services Segment.

In the second quarter of 2017, we concluded nearly 469,000 new
financing and leasing contracts with retail customers. This represents
a slight increase of 1.7% over the same period of last year. We saw a
moderate decrease in the number of new leasing contracts, while the
number of new financing contracts increased. At the end of June 2017,
the Financial Services Segment managed a total of 4.88 million
contracts with retail customers – 3.8% more than at the start of the
year. 47.6% of new BMW Group vehicles were leased or financed by the
Financial Services Segment in the first half-year.

In the first six months of 2017, pre-tax earnings for the segment
climbed 10.3% to 1.18 billion euros. The risk situation remains stable
overall. The net credit loss ratio of 0.31% remains very low. On the
whole, used car prices worldwide stabilised in the second quarter of
2017. We are continuing to monitor trends very closely, also for
vehicles with diesel engines. From today’s perspective, we have made
adequate provision for business risks from loans and residual values.

Let’s move on to the Motorcycles Segment.

In the first six months, we delivered almost 88,400 motorcycles to
customers – 9.5% more than the previous year. This was BMW Motorrad’s
best-ever first half-year – with double-digit growth in Europe, South
America and China. The segment’s second-quarter revenues rose by 12.8%
to 696 million euros, mainly due to higher volumes. Revenues for the
first six months reached 1.32 billion euros. Segment EBIT for the
first half-year increased to 229 million euros. EBIT for the second
quarter totalled 104 million euros. The EBIT margin for the same
period was 14.9%. The figure for the year to the end of June stood at 17.4%.

So those were the figures for the Motorcycles Segment.

I would now like to talk about the outlook for the
Group for the second half of the year. The first half of 2017
was positive for the BMW Group. However, with the uncertainty
surrounding political and economic developments worldwide, the rest of
the year will remain challenging. As usual, we also expect to face
higher expenses in the second half of the year than at the beginning.
Nevertheless, on the basis of these strong figures, the BMW Group
remains confident about the second half of 2017, and we are able to
confirm our guidance for the full year.

Provided conditions do not deteriorate significantly, we expect to
achieve a slight increase in Group earnings before
tax. We also forecast a slight increase in Automotive
deliveries, assuming conditions remain stable. Due to
positive translation effects, we expect the increase in
Automotive Segment revenues for this year to be
solid. Although high upfront investment in future projects will dampen
earnings, we are still targeting an EBIT margin of
between 8 and 10% in the Automotive Segment for the full year.
Deliveries in the Motorcycles Segment are expected
to increase significantly this year. As in the Automotive Segment, we
will be targeting an EBIT margin within the 8-10%
range for the Motorcycles Segment.

The positive business development in the Financial Services Segment
should continue in 2017. Faced with growing capital adequacy
requirements and normalisation in the risk situation, return
on equity is expected to decrease slightly – however it is
expected to remain above our minimum level of 18%.

Ladies and Gentlemen,

Global economic and political conditions remain highly volatile and
therefore difficult to predict. As previously announced, we also
anticipate higher costs for new model launches and upfront investments
for strategic projects in the second half of the year.

We are countering this with ongoing measures on both the cost and the
income side and systematically tailoring our product and service
structure to our customers’ wishes. At the same time, we are setting
priorities and reducing complexity – both in our vehicle line-up and
our internal structures and processes.

Our strategic focus is firmly on the long term. There is no doubt in
my mind that we have the right strategy – and the financial strength
we need to shape our future.